Government audit in India is carried out by the Comptroller and Auditor General (CAG), an independent constitutional authority. The CAG audits the accounts of the Union and the States and bodies they own or finance, and its standards describe three types of audit: financial audit, compliance audit and performance audit. Reports go to the President or Governor, who lays them before Parliament or the State Legislature.
Facts checked: 10 October 2026. Constitutional text of Articles 148 to 151 was confirmed from cag.gov.in through search results (the page itself could not be fetched; Article 151 wording came via constitutionofindia.net and a cag.gov.in snippet). The three audit types are from CAG's Auditing Standards 2017, via search snippets and a secondary reproduction. Sections 139(5) and 143(6) of the Companies Act were confirmed from CAG audit reports and company filings, not the statute text, which could not be fetched. Section numbers of the 1971 Act were confirmed from CAG pages. Check the original before formal citation.
The constitutional basis
Articles 148 to 151 of the Constitution deal with the CAG:
| Article | What it provides |
|---|---|
| 148 | The President appoints the CAG. Removal is on the same grounds and by the same procedure as a Supreme Court judge. |
| 149 | The CAG's duties and powers are as Parliament prescribes by law (the 1971 Act below). |
| 150 | The form of Union and State accounts is prescribed by the President on the CAG's advice. |
| 151 | Reports on Union accounts go to the President, who lays them before each House of Parliament. Reports on State accounts go to the Governor, who lays them before the State Legislature. |
The 1971 Act
The Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 was enacted under Articles 148(3) and 149 and has been amended since. CAG's own pages place the audit provisions in sections 13 to 21, with section 13 covering expenditure from the Consolidated Funds and the Contingency and Public Accounts, section 14 covering bodies and authorities substantially financed from those funds, and section 16 covering receipts. Sections 19 and 20 deal with audit of certain corporations and bodies. The Regulations on Audit and Accounts, 2007 were issued under section 23.
What the CAG audits
- Accounts of the Union and of each State and Union territory, including the Consolidated Fund, Contingency Fund and Public Account.
- Receipts, for example tax revenue.
- Bodies and authorities substantially financed from government funds.
- Government companies and, as the law governing them provides, statutory corporations. Whether a given corporation is covered depends on its own statute and on the 1971 Act.
The three types of government audit
Under CAG's Auditing Standards 2017:
| Type | Question it answers | Typical output |
|---|---|---|
| Financial audit | Are the financial statements presented in accordance with the applicable reporting and regulatory framework? | Opinion on financial statements |
| Compliance audit | Do activities, transactions and information comply with the Constitution, Acts, rules, orders and sound financial principles? | Observations on irregularity, loss, excess or unauthorised expenditure |
| Performance audit | Are programmes and institutions working with economy, efficiency and effectiveness, and could they improve? | Report with findings and recommendations |
A performance audit does not question the policy decisions of the legislature; it examines whether implementation has fallen short of the intended objective.
Government companies and the Companies Act, 2013
For a government company, the audit is shared between a chartered accountant firm and the CAG.
- Section 139(5): The CAG appoints the statutory auditor of a government company, and of other companies owned or controlled by government as the section provides, usually from a panel of firms. CAG reports describe the appointment as within 180 days of the start of the financial year. Section 139(7) covers first auditors.
- Section 143(5): The CAG can issue directions to the appointed auditor on how to conduct the audit; the auditor reports on action taken.
- Section 143(6): Within sixty days of receiving the audit report, the CAG may conduct a supplementary audit of the company's accounts and comment upon or supplement the auditor's report. CAG's comments are placed before the annual general meeting with the auditor's report.
- Section 143(7): The CAG may order a test audit of the accounts of a company covered by section 139(5) or 139(7), and section 19A of the CAG's (Duties, Powers and Conditions of Service) Act, 1971 then applies to the report.
The statutory auditor's opinion remains the auditor's own. The CAG's role is oversight, and the supplementary audit is typically limited in scope; one company filing records the CAG working without access to the auditor's working papers.
Worked example (illustrative)
A fictitious state power distribution company has a statutory auditor appointed by the CAG for FY 2025-26. The firm gives a clean opinion on the financial statements. The CAG's team later finds receivables from a municipal body of ₹120 crore without provisioning despite no payment for four years. It issues a comment under section 143(6)(b) that profit is overstated and receivables overstated by that amount. The comment is placed before the AGM and the company responds. Separately, a compliance audit of the same company's procurement finds purchase orders placed without tendering above the delegated limit, and a performance audit of its rural electrification programme assesses delays and cost overruns. Those go in CAG reports laid before the State Legislature.
For how this differs from other audits, see types of audit in India and internal vs statutory vs tax audit. For the private sector, see what statutory audit is.
Frequently asked questions
Who appoints the CAG?
The President, by warrant. Removal is on the same grounds as for a Supreme Court judge (Article 148).
Does the CAG audit private companies?
No. The CAG's mandate covers government and government-funded bodies, and government companies. Private companies appoint auditors under section 139 through the shareholders.
What is the difference between compliance and performance audit?
Compliance audit tests against rules and authorities. Performance audit assesses economy, efficiency and effectiveness against objectives.
Who sees the CAG reports?
They are submitted to the President or Governor and laid before Parliament or the Legislature. The Public Accounts Committee typically examines them.
Does a CAG supplementary audit replace the statutory audit?
No. The statutory auditor gives the opinion; the CAG's supplementary audit is a review of that work.
See the audit glossary for related terms.
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error